Sanghvi Dhiraji Bhutaji & Sons, Pune V. Assistant Commissioner of Income tax,

ITSSA 10/PUN/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3607 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-12-2017
• Assessment Year: misc
• Appeal Filed On: 24-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL ITA NO S; PUN SHRI
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Search and seizure; Block assessment; Revised return
• Section: 142(1); 145; 148; 6; 132; 144; 2; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 08 /P U N/20 1 7 BLOCK ASSESSMENT PERIOD : 1996 - 97 TO 2002 - 03 (PART) SHRI MANROOPLAL MALAJI SANGHVI - HUF, PROP. SANGHVI DHIRAJI BHUTAJI & SONS, C/O SHAH KHANDELWAL JAIN & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, RIVERSIDE BUSINESS BAY, WELLESLEY ROAD, NEAR RTO, PUNE 411001 . / APPELLANT PAN: AABHS9479Q VS. THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2), PUNE . / RESPONDENT . / ITA NO. 10 /P U N/20 17 BLOCK ASSESSMENT PERIOD : 1996 - 97 TO 2002 - 03 (PART) SANGHVI DHIRAJI BHUTAJI & SONS, C/O SHAH KHANDELWAL JAIN & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, RIVERSIDE BUSINESS BAY, WELLESLEY ROAD, NEAR RTO, PUNE 411001 . / APPELLANT PAN: AAEFS8892G VS. THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2), PUNE . / RESPONDENT / APPELLANT BY : SHRI NILESH KHANDELWAL / RESPONDENT BY : S HRI VIVEK AGGARWAL 2 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR / DATE OF HEARING : 2 7 . 12 .2017 / DATE OF PRONOUNCEMENT: 1 7 . 0 1 .201 8 / ORDER PER SUSHMA CHOWLA, JM: BOTH T HE APPEAL S FILED BY RELATED ASSESSEE ARE AGAINST SEPARATE ORDER S OF CIT(A), PUNE - 11, DATED 30.11.2016 RELATING TO BLOCK ASSESSMENT PERIOD 1996 - 97 TO 2002 - 03 (PART) AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 1 5 8BC(C) R.W.S. 158BD OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). 2 . THESE TWO APPEALS RELATING TO THE CONNECTED ASSESSEE ON SIMILAR ISSUE S WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. IN BOTH THE APPEALS, THE ASSESSEE IS AGGRIEVED BY THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SE CTION 158BC(C) R.W.S. 158BD OF THE ACT. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS AGAINST JURISDICTIONAL ISSUE OF POWER OF THE ASSESSING OFFICER. THE OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ON WITHOUT PREJUDICE BASIS TO GROUND OF APP EAL NO.1 RAISED. I N ORDER TO ADJUDICATE THE ISSUES, RE FERENCE IS BEING MADE TO THE FACTS AND ISSUES IN ITA NO. 08 /PUN/201 7 . 3. THE ASSESSEE IN ITA NO. 08 /PUN/201 7 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & AS PER PROVISIONS OF LAW, IT BE HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IN TERMS OF PROVISIONS OF SEC.158BC(C) R.W.S 158BD OF THE INCOME TAX ACT, 1961 BE HELD AS INVALID, ILLEGAL & NOT TENABLE IN LAW & WITHOUT ASSUMING JURISDICTION IN TE RMS OF RELEVANT PROVISIONS OF THE ACT. THE ORDER PASSED BE CANCELLED. 3 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR 2. WITHOUT PREJUDICE TO GROUND NO.1 & IN THE ALTERNATIVE IT BE HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS BARRED BY LIMITATION OF TIME & IS NOT TENABLE IN LAW & SAME BE CANC ELLED. 3. WITHOUT PREJUDICE TO GROUND 1 & 2 & IN THE ALTERNATIVE, ON FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & AS PER PROVISIONS OF LAW, IT BE HELD THAT THERE IS NO UNDISCLOSED INCOME ASSESSABLE IN THE HANDS OF THE APPELLANT IN TERMS OF PROVISIONS OF CHARTER XIV B OF THE ACT. IT FURTHER BE HELD THAT THE INCOME ASSESSED BY THE ASSESSING OFFICER AS UNDISCLOSED OF RS.28,49,250/ - ; RS.43,50,000/ - AND RS.3,36,285/ - AS DISCUSSED IN THE ORDER IS ERRONEOUS & CONTRARY TO THE RELEVANT PROVISIONS OF THE ACT. THE INCOME SO ASSESSED BE DELETED FULLY. THE APPELLANT BE GRANTED JUST & PROPER RELIEF IN THESE RESPECTS. 4. WITHOUT PREJUDICE TO GROUND NO . 1, 2 & 3 & IN THE ALTERNATIVE, ON FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & AS PER PROVISIONS OF LAW, IT BE HELD THAT ENHANCEMENT OF RS.1,13,96,998/ - MADE BY THE 1 ST APPELLATE AUTHORITY IS UNWARRANTED, UNJUSTIFIED & IMPROPER & CONTRARY TO THE PROVISIONS OF LAW & FACTS PREVAILING IN THE CASE. THE ENHANCEMENT OF RS.1,13,96,998/ - MADE BY THE 1 ST APPELLATE AUTHORITY BE DELETED. THE APPELLANT BE GRANTED JUST & PROPER RELIEF IN THIS RESPECT. 5. WITHOUT PREJUDICE TO GROUND 1, 2, 3 & 4 & IN THE ALTERNATIVE FOR ANY REASON ANY ADDITION IS SUSTAINED ON ACCOUNT OF STOCK VALUATION, THE APPELLANT BE GRANTED THE CONSEQUENTIAL RELI EF IN THAT RESPECT. 4. BRIEFLY, IN THE FACTS OF THE CASE, SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) OF THE ACT WAS CONDUCTED AT THE BUSINESS AND RESIDENTIAL PREMISES OF SANGHVI GROUP ON 11.10.2001. THE SAID OPERATIONS WERE CARRIED OUT AT DIFFERENT ADDRESSES. THE SAID GROUP WAS MAINLY ENGAGED IN THE BUSINESS OF TRADING IN TIMBER, SCRAP, INDUSTRIAL GASES AND CEMENT, ETC. DURING THE COURSE OF SEARCH, STOCK OF TIMBER VALUED AT RS.75,34,179/ - WAS PUT UNDER DEEMED SEIZURE IN THE CASE OF M/S. SANGHVI DHI RAJI BHUTAJI & SONS AND M/S. SANGHVI MALCHAND DHIRAJI & SONS. BESIDES, VOLUMINOUS BOOKS OF ACCOUNT AND DOCUMENTS WERE ALSO SEIZED FROM THE BUSINESS AND RESIDENTIAL PREMISES. NOTICE UNDER SECTION 158BC OF THE ACT WAS ISSUED IN THE NAME OF SHRI MANROOPLAL M. SANGHVI (HUF), PROP. DHIRAJI BHUTAJI & SONS AND M/S. ARIHANT GASES ON 06.05.2002. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN REPLY STATED THAT T HE PROPRIETARY OF ARIHANT GASES AND DHIRAJI BHUTAJI & SONS IS NAMED AS SHRI MANROOPLAL M. SANGHVI 4 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR (HUF). HOWEVER, THE SAID HUF D OES NOT OWN ANY SUCH PROPRIETARY CONCERN. IT WAS FURTHER POINTED OUT THAT THE NAME OF PROPRIETARY CONCERN OWNED BY ASSESSEE HUF WAS SAN G HVI DHIRAJI BHUTAJI & SONS, WHICH ALSO HAD SISTER CONCERN UNDER THE NAME AND STYLE OF SIDDHI PLY. THE ASSESSEE THUS, CLAIMED THAT NOTICE ISSUED UNDER SECTION 158BC OF THE ACT WAS DEFECTIVE AND INVALID ; THE ASSESSING OFFICER DROPPED THE SAID PROCEEDINGS. HOWEVER, FRESH NOTICE UNDER SECTION 158BC OF THE ACT WAS ISSUED ON 30.10.2002. IN RESPONSE THERETO, THE ASSESSEE FILED THE RETURN OF INCOME FOR BLOCK PERIOD DECLARING NIL INCOME. THE QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE TO CALL FOR CERTAIN DETAILS AND EXPLANATION. THE ASSESSEE IN REPLY, SUB MITTED THAT THE FIRST NOTICE ISSUED FOR FILING BLOCK RETURN DATED 06.05.2002 WAS CANCELLED SINCE THE SAME WAS FOUND TO BE ERRONEOUS. IT WAS THUS, POINTED OUT THAT DUE TO THE SAME, THE ASSESSEE WAS APPREHENSIVE THAT SEARCH WARRANT ISSUED WAS ALSO MAY BE ER RONEOUS AND PROCEEDINGS CONDUCTED UNDER SUCH SEARCH WARRANT MAY NOT BE VALID. HENCE, COPY OF SEARCH WARRANT IN THE CASE OF ASSESSEE HUF FOR CARRYING OUT SEARCH AT THE PREMISES OF ASSESSEE WAS ASKED FOR. THE ASSESSEE THOUGH SUBMITTED CERTAIN EXPLANATIONS BUT THE SAME WERE WITHOUT PREJUDICE TO THE RIGHT TO CHALLENGE THE VALIDITY OF SEARCH PROCEEDINGS AND SEARCH ASSESSMENT. THE ASSESSING OFFICER ON RECEIPT OF THE SAID LETTER OF ASSESSEE CONFIRMED ITS CONTENTION AND THE PROCEEDINGS INITIATED UNDER SECTION 15 8BC OF THE ACT WERE DROPPED. SINCE DURING THE COURSE OF SEARCH, VOLUMINOUS BOOKS OF ACCOUNT AND DOCUMENTS PERTAINING TO THE ASSESSEE AND ITS PROPRIETARY CONCERN WERE SEIZED ALONG WITH STOCK OF TIMBER, NOTICE UNDER SECTION 158BD OF THE ACT WAS ISSUED AND S ERVED UPON THE ASSESSEE. THE ASSESSEE WAS ASKED TO FURNISH RETURN OF INCOME FOR THE BLOCK PERIOD. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY RETURN OF INCOME IN RESPONSE THERETO AND NOTICE UNDER SECTION 142(1) OF THE ACT WAS ISSUED. THE ASSESSEE IN RES PONSE 5 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR STATED THAT THE COPY OF SEARCH WARRANT WAS NOT RECEIVED BY THE ASSESSEE AND IN THE ABSENCE OF THE SAME, THE ASSESSEE QUESTIONED JURISDICTION OF THE ASSESSING OFFICER. IT WAS ALSO POINTED OUT THAT NO NOTICE UNDER SECTION 158BD OF THE ACT WAS SERVED U PON THE ASSESSEE. IT WAS FURTHER CONTENDED THAT IN THE ABSENCE OF SERVICE OF NOTICE UNDER SECTION 158BD OF THE ACT, WITHIN TWO YEARS FROM THE END OF THE MONTH IN WHICH SEARCH WAS CONCLUDED I.E. BY END OF OCTOBER, 2003, PROCEEDINGS NOW INITIATED FOR THE BL OCK PERIOD WERE OUT OF TIME AND INVALID, THE REQUEST WAS MADE TO DROP THE PROCEEDINGS INITIATED UNDER SECTION 158BD OF THE ACT. IN RESPONSE TO FURTHER NOTICE ISSUED ALSO, SIMILAR REQUEST WAS MADE BUT THE ASSESSING OFFICER HELD THAT ON VERIFICATION OF EARL IER LETTERS OF THE ASSESSEE, CONTENTION OF ASSESSEE WAS VERIFIED BY THE THEN ASSESSING OFFICER AND THE PROCEEDINGS INITIATED UNDER SECTION 158BC OF THE ACT FOR THE NOTICE DATED 30.10.2002 WERE DROPPED ; BUT SINCE BOOKS OF ACCOUNT AND DOCUMENTS PERTAINING TO THE ASSESSEE FOUND AND SEIZED ALONG WITH STOCK OF TIMBER, PROCEEDINGS UNDER SECTION 158BD OF THE ACT WERE INITIATED BY NOTICE DATED 16.10.2003 , WHICH WERE SERVED UPON THE ASSESSEE ON 18.10.2003. AGAIN ON REQUEST OF ASSESSEE, COPY OF SAID NOTICE WAS PROVI DED TO THE COUNSEL OF THE ASSESSEE ON 03.06.2004. THE CONTENTION OF ASSESSEE THAT NOTICE UNDER SECTION 158BD OF THE ACT WAS NOT ISSUED WITHIN TWO YEARS FROM THE END OF THE MONTH IN WHICH SEARCH WAS CONDUCTED WAS FOUND TO BE NOT CORRECT. THE ASSESSING OFF ICER FURTHER HELD THAT NOTICE ISSUED ON 16.10.2003 WAS WELL WITHIN TWO YEARS AND HENCE, VALID. THE ASSESSEE THEREAFTER, WAS ASKED TO FURNISH THE DETAILS ON MERITS AND THE ISSUE WAS DECIDED ON MERITS BY THE ASSESSING OFFICER. THE ASSESSMENT ORDER PASSED U NDER SECTION 158BC(C) R.W.S. 158BD OF THE ACT IS DATED 28.10.2005. 6 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR 5. THE CIT(A) IN THE FIRST ROUND HELD THAT THE ASSESSEES OBJECTIONS AGAINST ASSESSMENT BEING BARRED BY LIMITATION HAD NO BASIS AS THE ASSESSMENT WAS COMPLETED WITHIN TWO YEARS FROM THE DA TE OF NOTICE ISSUED UNDER SECTION 158BD OF THE ACT. HE FURTHER HELD THAT IN THE FIRST PLACE, PROCEEDINGS INITIATED UNDER SECTION 158BC OF THE ACT WERE HELD TO BE NON EST SINCE THERE WAS NO SEARCH IN THE CASE OF ASSESSEE. THE SAID ACTION UNDER SECTION 158BC OF THE ACT WAS DROPPED BEFORE PROCEEDINGS UNDER SECTION 158BD OF THE ACT WERE TAKEN UP. THE EXERCISE OF JURISDICTION BY THE ASSESSING OFFICER BY RECORDING REASONS FOR INITIATING PROCEEDINGS UNDER SECTION 158BD OF THE ACT WAS HELD TO BE CORRECTLY INVOKED. THE ASSESSEE CHALLENGED THE ORDER OF CIT(A) BEFORE THE TRIBUNAL AND THE TRIBUNAL IN BUNCH OF APPEALS WITH LEAD ORDER IN ITA NO. 464/PN/2007, RELATING TO BLOCK ASSESSMEN T PERIOD 1996 - 97 TO 2002 - 03 (PART), VIDE ORDER DATED 28.02.2011 SET ASIDE THE ORDER OF CIT(A) AND REMANDED THE MATTER BACK TO THE FILE OF CIT(A) FOR FRESH ADJUDICATION. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE REPRODUCED BY THE CIT(A) UNDER PARA 7 AT PAG ES 4 TO 8 OF THE APPELLATE ORDER. THE ISSUE WHICH WAS SET ASIDE WAS REGARDING ASSUMPTION OF JURISDICTION AND ISSUE OF NOTICE UNDER SECTION 158BD OF THE ACT. AFTER CONSIDERING SUBMISSIONS OF ASSESSEE, THE FIRST OBJECTION OF THE ASSESSEE WAS DECIDED. THE CIT(A) HELD THAT 158BC ASSESSMENT S W ERE COMPLETED IN THE CASE OF POPATMAL SANGHVI, INDIVIDUAL AND MANRUP L AL SANGHVI ON 28.11.2003 AND COPIES OF ASSESSMENT ORDERS WERE PART OF THE PAPER BOOK FILED BY THE ASSESSEE. THUS, IT WAS WRONG TO SAY THAT THERE WAS N O ASSESSMENT UNDER SECTION 158BC OF THE ACT IN THE CASE OF SANGHVI GROUP CONSEQUENT TO SEARCH CONDUCTED ON 11.10.2001. THE SECOND CONTENTION OF THE ASSESSEE THAT ONCE NOTICE UNDER SECTION 158BC OF THE ACT HAD BEEN ISSUED, THE ASSESSING OFFICER COULD NOT H AVE RECORDED HIS SATISFACTION UNDER SECTION 158BD OF THE ACT SUBSEQUENTLY AND ISSUE FRESH NOTICE, WAS FOUND TO BE NOT ACCEPTABLE 7 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR SINCE THE ASSESSING OFFICER HAD DROPPED PROCEEDINGS UNDER SECTION 158BC OF THE ACT. AFTER THAT, THE ASSESSING OFFICER HAD RECO RDED SATISFACTION FOR INITIATING 158BD PROCEEDINGS AND HENCE, THEY WERE CORRECTLY INVOKED. THE CIT(A) IN PARA 11 OBSERVED THAT THE ASSESSING OFFICER HAD ISSUED THE SAID NOTICE UNDER SECTION 158BD OF THE ACT AFTER RECORDING HIS SATISFACTION REGARDING THE F ACT THAT BOOKS OF ACCOUNT, ETC. SEIZED DURING THE COURSE OF SEARCH PERTAINED TO THE ASSESSEE. THE SATISFACTION HAD BEEN RECORDED BY THE ASSESSING OFFICER ON 15.10.2003 REGARDING ISSUE OF 158BD NOTICE AND NOTICE WAS ISSUED ON 16.10.2003. THUS, IT COULD NO T BE SAID THAT PROCEEDINGS WERE INITIATED WITHOUT ANY JUSTIFICATION. HE FURTHER DEALT WITH THE ISSUE OF SAID PROCEEDINGS BEING BARRED BY LIMITATION WHICH WAS NEXT PLEA OF ASSESSEE AND ALSO THE SERVICE OF SAID NOTICE UPON THE ASSESSEE. 6. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID FINDINGS OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US HAS REFERRED TO SATISFACTION NOTE DATED 15.10.2003 AND POINTED OUT THAT THE ASSESSING OFFICER IN PARA 12 OBSERVED THAT F OR THE DETAILED REASONS GIVEN IN THE SATISFACTION NOTE DTD. 15/10/2003, PROCEEDINGS INITIATED U/S 158BC WERE DROPPED AND TO REGULARIZE THE PROCEEDINGS AND TO REMOVE THE TECHNICAL FL A W N OTICES U/S 158BD WERE ISSUED. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED OUT ON THE INDIVIDUALS I.E. POPAT L AL SANGHVI AND MANR OO P L AL SANGHVI, WHO ARE NOT PROPRIETORS OF M/S. SANGHVI DHIRAJI BHUTAJI & SONS [ SOLE PROPRIETOR MANROOPLAL SANGHVI (HUF) ] AND M/S. SANGHVI MALCHAND DHIRAJI & SONS (PROPRIETOR, POPATLAL SANGHVI, HUF). HE FURTHER REFERRED TO SATISFACTION UNDER 158BD PROCEEDINGS WHICH TALKS OF TRANSACTIONS WITH HUF CONCERN. THE SAID CONCERN S OF HUF HAD NO CONNECTION 8 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR WITH SEARCH ON THE INDIVIDUALS. HE FURTHER STATED THAT THERE WAS NO SATISFACTION IN THE INDIVIDUAL CASES THAT PAPERS OF KARTA OF HUF HAVE BEEN FOUND. THE SATISFACTION WAS THAT WE HAVE FOUND THAT PROCEEDINGS INITIATED UNDER SECTION 158BC OF THE ACT WERE INCORRECT AND HENCE, 158BD PROCEEDIN GS ARE INITIATED. HE THUS, STRESSED THAT WHERE THERE WAS NO GENESIS, NO NUCLEUS, SO HOW THE PROCEEDINGS UNDER SECTION 158BD OF THE ACT WERE CORRECT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO RELIED ON THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN SISTER CONCERN OF ASSESSEE IN ITO VS. SHRI SANGHVI ONKARMAL RATANLAL & CO. IN ITA NO.886//PUN/2013 AND CROSS APPEAL IN ITA NO.937/P UN/2013, RELATING TO BLOCK PERIOD 1996 - 97 TO 2002 - 03, ORDER DATED 31.05.2017. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF ASSESSING OFFICER AND CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE PERUSAL OF ASSESSMENT ORDER AND THE FACTS OF THE CASE, WHICH WE HAVE ALREADY REFERRED TO IN THE EARLIER PARAS REVEALED THAT CONSEQUENT TO SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) OF THE ACT CARRIED OUT ON 11.10.2001 ON THE BUSINESS AND RESIDENTIAL PREMISES OF SANGHVI GROUP WHICH WAS ENGAGED IN THE BUSINESS OF TRADING OF TIMBER, SCRAP, ETC., STOCK OF TIMBER WAS FOUND WHICH WAS SEIZED IN THE CASE OF M/S. SANGHVI DHIRAJI BHUTAJI & SONS AND M/S. SANGHVI MALCHAND DHIRAJI & SONS . IN ADDITION, VOLUMINOUS BOOKS OF ACCOUNT AND DOCUMENTS WERE ALSO SEIZED. INITIALLY, PROCEEDINGS UNDER SECTION 158BC OF THE ACT WERE INITIATED AGAINST ASSESSEE HUF WHICH WERE ON ACCOUNT OF SOLE PROPRIETARY CONCERN S DHIRAJI BHUTAJI & SONS AND M/S. ARIHANT GASES ; WHEN T HE ASSESSEE POINTED OUT 9 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR THAT THE ASSESSEE HUF DOES NOT OWN ANY SUCH PROPRIETARY CONCERNS, THEN THE PROCEEDINGS INITIATED UNDER SECTION 158BC OF THE ACT WERE DROPPED. ANOTHER NOTICE UNDER SECTION 158BC OF THE ACT WAS ISSUED ON 30.10.2002, WHICH WAS ALSO DR OPPED IN THE ABSENCE OF SEARCH WARRANT. HOWEVER, PROCEEDINGS UNDER SECTION 158BD OF THE ACT WERE INITIATED ON 16.10.2003 AS DURING THE COURSE OF SEARCH, VOLUMINOUS BOOKS OF ACCOUNT AND DOCUMENTS PERTAINING TO THE ASSESSEE AND THE PROPRIETARY CONCERNS WERE SEIZED. THE ASSESSEE IS AGGRIEVED BY INITIATION OF SAID PROCEEDINGS AGAINST THE ASSESSEE. 10. THE ASSESSING OFFICER HAS RECORDED SATISFACTION NOTE WHICH IS ATTACHED AS ANNEXURE DATED 15.10.2003, UNDER WHICH LAST PARA READS AS UNDER: - 1 2. FOR THE DETAIL ED REASONS GIVEN IN THE SATISFACTION NOTE DTD. 15/10/2003, PROCEEDINGS INITIATED U/S 158BC WERE DROPPED AND TO REGULARIZE THE PROCEEDINGS AND TO REMOVE THE TECHNICAL FLAW NOTICES U/S 158BD WERE ISSUED. THE CASE HAS BEEN DULY ASSIGNED TO THIS CIRCLE VIDE C IT III, PUNES ORDER DTD._____ 11. ON PERUSAL OF SAID NOTE REFLECTS THAT AFTER NOTING DIFFERENT FACTUAL ASPECTS OF THE CASE, THE ASSESSING OFFICER HA D RECORDED SATISFACTION FOR INITIATING 158BD PROCEEDINGS ON THE GROUND THAT THE PROCEEDINGS INITIATED UND ER SECTION 158BC OF THE ACT WERE DROPPED AND TO REGULARIZE THE PROCEEDINGS AND TO REMOVE TECHNICAL FLAW, NOTICE UNDER SECTION 158BD OF THE ACT IS TO BE ISSUED. THE SAID NOTICE HAS BEEN ISSUED ON 1 6 .10.2003. THE COPY OF SAID NOTICE DATED 16.10.2003 IS PLACED AT PAGE 19 OF THE PAPER BOOK AND THE PERUSAL OF THE SAME REFLECTS THAT THE SAME WAS ISSUED UNDER SECTION 158BD OF THE ACT. THE SAID NOTICE SUFFERS FROM THE BASIC JURISDICTION AS THE PROCEEDINGS UNDER SECTION 158BC OF THE ACT HAV E BEEN DROPPED AND ONCE THE SAME HAVE BEEN DROPPED, THERE IS NO QUESTION OF INITIATING PROCEEDINGS UNDER SECTION 158BD OF THE ACT. IN THE ABSENCE OF ANY ASSESSMENT 10 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR BEING MADE UNDER SECTION 158BC OF THE ACT, THERE IS NO MERIT IN INITIATING PROCEEDINGS UNDE R SECTION 158BD OF THE ACT. 12. SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN THE CASE OF SISTER CONCERN OF ASSESSEE IN ITO VS. SHRI SANGHVI ONKARMAL RATANLAL & CO. (SUPRA), WHEREIN INITIALLY 158BC PROCEEDINGS WERE INITIATED, WHICH WERE DROPPED AND THEREAFT ER, 158BD PROCEEDINGS WERE INITIATED. THE TRIBUNAL IN THE SAID CASE HELD AS UNDER: - 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE DOCUMENTS AN D THE DECISIONS ON WHICH THE LD. AR OF THE ASSESSEE HAS PLACED RELIANCE DURING THE COURSE OF SUBMISSIONS. THE ASSESSEE HAS CHALLENGED THE ASSESSMENT PROCEEDINGS U/S. 158BD ON THREE COUNTS. THE FIRST GROUND TAKEN BY THE ASSESSEE IN CHALLENGING THE ASSESSMEN T PROCEEDINGS IS THAT ONCE THE ASSESSMENT PROCEEDINGS U/S. 158BC ARE DROPPED, ASSESSMENT PROCEEDINGS U/S. 158BD CANNOT BE CARRIED OUT AGAINST THE PERSON OTHER THAN SEARCHED PERSON. A PERUSAL OF THE DOCUMENTS ON RECORD SHOW THAT THE FIRST NOTICE U/S. 158BC DATED 06 - 05 - 2002 WAS ISSUED IN THE NAME OF ONKARMAL RATANLAL & CO.. SINCE, THERE WAS NO FIRM BY THE SAID NAME, THE NOTICE WAS CANCELLED. ANOTHER NOTICE U/S. 158BC DATED 30 - 10 - 2002 IN THE NAME OF M/S. SANGHAVI ONKARLAL RATANLAL & CO. (RF) WAS ISSUED. THA T WAS ALSO CANCELLED AS NO FIRM BY THAT NAME EVER EXISTED AT THE GIVEN ADDRESS. IN VIEW OF THE FACT THAT THE TWO NOTICES U/S. 158BC WERE IN THE NAME OF NON - EXISTING FIRMS COUPLED WITH THE FACT THAT SEARCH WARRANT WAS ALSO ISSUED IN THE NAME OF ONKARLAL RAT ANLAL & CO., A NONEXISTING FIRM THE DEPARTMENT DROPPED THE PROCEEDINGS INITIATED U/S. 158BC ON ACCOUNT OF TECHNICAL DEFECT. 8. SEARCH AND SEIZURE PROCEEDINGS ARE CARRIED OUT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 132 OF THE ACT. THE WARRANT OF AUTH ORIZATION IS THE FOUNDATION OF ENTIRE SEARCH PROCEEDINGS. A BARE PERUSAL OF PROVISIONS OF SECTION 132(1) SHOWS THAT THE WARRANT OF AUTHORIZATION IS ISSUED AGAINST ANY PERSON SUBJECT TO THE CONDITIONS LAID DOWN U/S. 132(1) OF THE ACT. THUS, THE WARRANT OF AUTHORIZATION IS PERSON SPECIFIC AND NOT PREMISES OR PLACE SPECIFIC. THE PLACE OR PREMISE MAY OR MAY NOT BE SPECIFIED IN THE WARRANT. IN THE PRESENT CASE THE WARRANTS WERE ISSUED IN THE NAME OF ONKARMAL RATANLAL & CO. , A NON - EXISTING FIRM, THEREFORE, TH E FIRST STEP TOWARDS THE SEARCH TAKEN BY THE DEPARTMENT IS FLAWED. REALIZING THIS MISTAKE THE DEPARTMENT DROPPED THE PROCEEDINGS U/S. 158BC OF THE ACT. ONCE, THE PROCEEDINGS U/S. 158BC ARE DROPPED ON ACCOUNT OF TECHNICAL DEFECT THE SUBSEQUENT PROCEEDINGS A RE VITIATED. THE PROVISIONS RELATING TO BLOCK ASSESSMENT IN SEARCH CASES ARE CONTAINED IN CHAPTER XIV - B OF THE ACT. THE CHAPTER IS AN INDEPENDENT CODE. THE POWER TO SEARCH AND SEIZE ARE CONFERRED ON TAX AUTHORITY U/S. 132 OF THE ACT. THE POWERS EXERCISED B Y THE TAX AUTHORITY UNDER SPECIAL CODE ARE EXTRA ORDINARY POWERS. IT THEREFORE, BECOMES NECESSARY TO CONSTRUE THE PROVISIONS OF SPECIAL CODE STRICTLY. 9. THE LD. AR HAS POINTED THAT THE NOTICE ISSUED U/S. 158BD IS INVALID AS FOR INITIATING ANY ACTION UNDER THE PROVISIONS OF SECTION 158BD, THE NOTICE HAS TO BE GIVEN IN ACCORDANCE WITH THE PROVISIONS OF SECTION 158BC OF THE ACT. BEFORE 11 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR PROCEEDINGS FURTHER IT WOULD BE RELEVANT TO FIRST REFER PROVISIONS OF SECTION 158BD ARE REPRODUCED HEREIN - BELOW : 158BD. WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UN DER SECTION 132 OR WHOSE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS WERE REQUISITIONED UNDER SECTION 132A, THEN, THE BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTIO N OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED 13[UNDER SECTION 158BC] AGAINST SUCH OTHER PERSON AND THE PROVISIONS OF THIS CHAPTER SHALL APPLY ACCORDINGLY. A PERUSAL OF PROVISIONS OF SECTION 158BD MAKE IT UNAMBIGUOUS CLEAR THAT FOR IN ITIATING ANY ACTION AGAINST THE PERSON OTHER THAN THE PERSON IN RESPECT OF WHOM SEARCH WAS MADE U/S. 132, THE ASSESSING OFFICER HAS TO FOLLOW THE PROCEDURE SET OUT U/S. 158BC AGAINST SUCH OTHER PERSON. IN OTHER WORDS, WHERE THE ACTION U/S. 158BD HAS TO BE TAKEN ON THE PERSON OTHER THAN THE SEARCHED PERSON, THE ASSESSING OFFICER CAN ARRIVE AT THE SATISFACTION ONLY AFTER ASCERTAINING WHETHER THERE IS ANY UNDISCLOSED INCOME AT ALL AND THIS FINDING CAN BE ARRIVED AT HIM ONLY IN THE COURSE OF ASSESSMENT PROCEEDI NGS U/S. 158BC OF THE ACT. IN THE PRESENT CASE SINCE PROCEEDING U/S. 158BC HAVE BEEN DROPPED THERE IS NO QUESTION OF INITIATION PROCEEDINGS U/S. 158BD OF THE ACT. THE ROAD TO SECTION 158BD PASS THROUGH SECTION 158BC. IN THE PRESENT CASE SINCE THERE IS NO A SSESSMENT U/S. 158BC, THE PROCEEDING U/S. 158BD HAS TO FAIL. 10. IN THE PRESENT CASE, WE FIND THAT THE NOTICE HAS BEEN ISSUED IN THE NAME OF ASSESSEE U/S. 158BD OF THE ACT. A COPY OF THE NOTICE IS AT PAGE 5 OF THE PAPER BOOK. IN VIEW OF THE MANDATE OF SE CTION 158BD THAT THE ASSESSING OFFICER HAS TO PROCEED U/S. 158BC, WE ARE OF THE CONSIDERED VIEW THAT FOR INITIATING PROCEEDINGS U/S. 158BD, NOTICE HAS TO BE ISSUED U/S. 158BC OF THE ACT. THUS, IN THE INSTANT CASE THE LAUNCHING PAD OF INITIATING ASSESSMENT PROCEEDINGS U/S. 158BD ITSELF SUFFERS FROM DEFECT. A PERUSAL OF SECTION 158BD REVEAL THAT THE WORDS UNDER SECTION 158BC WERE INSERTED BY THE FINANCE ACT, 2002 W.E.F. 01 - 06 - 2002. THE PROVISIONS OF SECTION 158BD PRIOR TO THIS AMENDMENT PROVIDED FOR INITIAT ING ACTION AGAINST THE PERSON OTHER THAN SEARCHED PERSON UNDER THE PROVISIONS OF CHAPTER XIB - B. THUS, THE ONLY PROCEDURE FOR BLOCK ASSESSMENT UNDER THIS CODE IS GIVEN U/S. 158BC OF THE ACT. THE AMENDMENT IS THUS CLARIFICATORY IN NATURE. 11. THE HON BLE KA RNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SMT. ANNAPOORNAMMA CHANDRASHEKAR (SUPRA) HAS CLARIFIED THIS ASPECT. IN THE SAID CASE, ASSESSMENT PROCEEDINGS WERE INITIATED U/S. 158BD AND THE NOTICE WAS ISSUED TO THE PERSON OTHER THAN SEARC HED U/S. 158BC. THE NOTICE WAS CHALLENGED ON THE GROUND THAT SINCE, THE BLOCK ASSESSMENT PROCEEDINGS ARE INITIATED AGAINST THE ASSESSEE U/S. 158BD THE NOTICE ISSUED U/S. 158BC IS VOID AB INITIO. THE HONBLE HIGH COURT REJECTING THE PLEA OF ASSESSEE UPHELD THE VALIDITY OF NOTICE U/S. 158BC. THE HONBLE HIGH COURT HELD : THUS BY FINANCE ACT 2002, WHICH CAME INTO EFFECT FROM 01 - 06 - 2002 THE WORD 'UNDER SECTION 158BC' IS INTRODUCED. PRIOR TO THE SAID AMENDMENT IF ANY ASSESSMENT HAS TO BE MADE OF UNDISCLOSED IN COME OF ANY OTHER PERSON THE PROVISIONS OF CHAPTER XIV - B WAS MADE APPLICABLE. AS IS CLEAR FROM THE WORDINGS OF THE SAID SECTION THAT IF THE AO SEIZES THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR OF ANY OTHER PERSON OTHER THAN THE PERSON WHOSE PREMISES IS SEA RCHED HE SHALL PROCEED AGAINST SUCH OTHER PERSON 12 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR UNDER THE PROVISIONS OF CHAPTER XIV - B. THERE WAS NO PROVISION IN THE SAID SECTION AS SUCH FOR ISSUE OF ANY NOTICE TO SUCH PERSON. SEC. 158BC PROVIDES FOR PROCEDURE FOR BLOCK ASSESSMENT WHICH READS AS UNDER: - '158BC. WHERE ANY SEARCH HAS BEEN CONDUCTED UNDER S. 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS ARE REQUISITIONED UNDER S. 132A, IN THE CASE OF ANY PERSON, THEN: - (A) THE AO SHALL: - (I) IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS REQUISITIONED AFTER THE 30TH DAY OF JUNE, 1995, BUT BEFORE THE 1ST DAY OF JANUARY, 1997, SERVE A NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITHIN SUCH TIME NOT BEI NG LESS THAN FIFTEEN DAYS; (II) IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS REQUISITIONED ON OR AFTER THE 1ST DAY OF JANUARY, 1997, SERVE A NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITHIN SUCH TIME NOT BEING LESS THAN FIFTEEN DAYS BUT NOT MORE THAN FORTY - FIVE DAYS, AS MAY BE SPECIFIED IN THE NOTICE A RETURN IN THE PRESCRIBED FORM AND VERIFIED IN THE SAME MANNER AS A RETURN UNDER CL. (I) OF SUB - S. (1) OF S. 142, SETTING FORTH HIS TOTAL INCOME INCLUDING THE UN DISCLOSED INCOME FOR THE BLOCK PERIOD: - PROVIDED THAT NO NOTICE UNDER S. 148 IS REQUIRED TO BE ISSUED FOR THE PURPOSE OF PROCEEDING UNDER THIS CHAPTER: - PROVIDED FURTHER THAT A PERSON WHO HAS FURNISHED A RETURN UNDER THIS CLAUSE SHALL NOT BE ENTITLED T O FILE A REVISED RETURN; (B) THE AO SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN S. 158BB AND THE PROVISIONS OF S. 142, SUB - SS. (2) AND (3) OF S. 143, S. 144 AND S. 145 SHALL, SO FAR AS MAY BE, APPLY; (C) THE AO, ON DETERMINATION OF THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN ACCORDANCE WITH THIS CHAPTER, SHALL PASS AN ORDER OF ASSESSMENT AND DETERMINE THE TAX PAYABLE BY HIM ON THE BASIS OF SUCH ASSESSMENT; (D) THE ASSETS SEIZED UNDER S. 132 OR REQU ISITIONED UNDER S. 132A SHALL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF S. 132B.' THE SAID PROVISION MANDATES THE SERVICE OF NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITHIN SUCH TIME NOT BEING LESS THAN 15 13 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR DAYS A RETURN IN THE PRESCRIBED FO RM AND VERIFY IN THE SAME MANNER AS THE RETURN GIVEN UNDER SUB - CL. (I) OF SUB - S. (1) OF S. 142 SETTING OUT HIS TOTAL INCOME INCLUDING THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD. THEREFORE WHERE THE ASSESSMENT IS TO BE DONE UNDER S. 158BC OR S. 158BD ISSUE OF A NOTICE IS MANDATORY AND THE SAID NOTICE IS ALSO PRESCRIBED UNDER THE ACT. IN ORDER TO CLARIFY THE POSITION BY FINANCE ACT, 2002, THE WORDS 'UNDER S. 158BC' IS EXPRESSLY PROVIDED. THE SAID AMENDMENT IS CLARIFICATORY IN NATURE. EVEN THOUGH IT IS STATED THAT THE PROVISIONS OF THIS CHAPTER SHALL APPLY AND IN THAT CHAPTER, S. 158BC WHICH IS THE PROVISION WHICH PRESCRIBES THE PROCEDURE FOR BLOCK ASSESSMENT THE ASSESSMENT UNDER S. 158BD HAS TO BE IN TERMS OF S. 158BC. WHEN PROCEEDINGS ARE INITIATED IN TERMS OF S. 158BC AGAINST A PERSON WHO IS COVERED UNDER S. 158BD AND THE NOTICE TO BE ISSUED IS PRESCRIBED UNDER THE ACT AND IN THE ABSENCE OF ANY PRESCRIPTION OF A NOTICE IN A PRESCRIBED MANNER UNDER S. 158BD THE ONLY NOTICE THAT REQUIRES TO BE ISSUED BOTH UNDE R S. 158B AND 158BD IS THE NOTICE WHICH IS PRESCRIBED. IT IS THE NOTICE PRESCRIBED UNDER S. 158BC. THEREFORE, THE CONTENTION THAT THE ASSESSMENT IS UNDER S. 158BD WHEREAS NOTICE ISSUED UNDER S. 158BC AND THEREFORE THE ENTIRE PROCEEDINGS IN PURSUANCE OF SUC H NOTICE IS VOID AND IS UNTENABLE. 12. THUS, IN VIEW OF THE FACTS OF THE CASE, PROVISIONS OF SECTION 158BD R.W.S. 158BC AND THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SMT. ANNAPOORNAMMA CHANDRASHEKAR (SUPRA ) WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSMENT PROCEEDINGS INITIATED AGAINST THE ASSESSEE U/S. 158BD ARE INVALID AND ARE LIABLE TO BE QUASHED. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE DEPARTMENT IS DISMISSED. 13. THE ISSUE ARISING IN THE PRESENT APPEAL IS THUS, SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN SISTER CONCERN OF THE ASSESSEE AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT INITIATION OF PROCEEDINGS UNDER SECTION 158BD OF THE ACT WAS WITHOUT JURIS DICTION , IN THE ABSENCE OF 158BC PROCEEDINGS. ACCORDINGLY, THE ASSESSMENT ORDER PASSED UNDER SECTION 158BC R.W.S. 158BD OF THE ACT DOES NOT SURVIVE. THE JURISDICTIONAL ISSUE RAISED VIDE GROUND OF APPEAL NO.1 IS THUS, DECIDED IN FAVOUR OF ASSESSEE. THE O THER GROUNDS OF APPEAL RAISED BY THE ASSESSEE ON WITHOUT PREJUDICE WOULD BECOME ACADEMIC IN NATURE. 14 ITA NO S . 08 & 10 /PUN/20 17 SHRI MANROOPLAL MALAJI SANGHVI - HUF & ANR 14. THE FACTS AND ISSUES IN ITA NO.10/PUN/2017 ARE IDENTICAL TO THE FACTS AND ISSUES IN ITA NO.08/PUN/2017 AND OUR DECISION IN ITA NO.08/PUN/2017 SHALL A PPLY MUTATIS MUTANDIS TO ITA NO.10/PUN/2017. 1 5 . IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 1 7 T H DAY OF JANUARY , 201 8 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 1 7 T H JANUARY , 201 8 . G G C C V V S S R R / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I / CIT(A), PUNE - 11 , PUNE ; 4. THE PR. C IT (CENTRAL) / CIT - I , PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE